China?s unbalancing act
As WTO membership nears, the neighbors become wary
By Michael Bociurkiw MSNBC CONTRIBUTOR
April 25 ? From Rangoon to Hanoi to Manila, business and political leaders are bracing for the coming of a ?new and improved China.? Throughout the 10-member Association of Southeast Asian Nations, there is fear that Beijing is on the verge of becoming a trade juggernaut that will shake up Asia?s economic status quo and ultimately put its neighbors at a severe disadvantage.
THE CONCERNS are rooted largely in China?s likely acceptance this year into the World Trade Organization. The 136-nation grouping, which promotes ?favored? trade relations among its members, will make it easier for foreigners to do business with Beijing, and for Beijing to sell its products abroad.
Perhaps nowhere is the China paranoia more acute than Singapore, the small Southeast Asian city-state that has no natural resources of its own ? but a superb regional business network, a strong base of multinational corporations and impressive human and technical resources.
?The concern about China in the WTO is really about China being more attractive to foreign investments, and it may have the effect of making Greater China and Northeast Asia as a whole more attractive than Southeast Asia,? said a Singapore Government source.
For Singapore, which is a regional hub for Southeast Asia and competes fiercely with Hong Kong for dominance in many sectors, a China that is a stronger draw for multinationals could in the long run undermine Singapore?s prominence as a corporate headquarters.
?We in ASEAN will have to think hard how to reposition ourselves for more intense competition,?
? GEORGE YEO Singapore's Industry and Trade Minister
Already, many multinationals have established a presence in the Greater China region. According to the United Nations Conference on Trade and Development, annual foreign direct investment in China hit about $40-billion in 1999, slightly down from an all time peak of about $43-billion in 1997.
Singapore?s strategy is to move up the value-chain ? focusing on such areas as cutting edge capabilities, skills and innovation of the workforce to maintain its relevance. The aim is to position Singapore at the apex of a manufacturing chain that stretches across the whole Southeast Asia. It is also pouring huge resources into kickstarting a ?New Economy? sector modeled after California?s high tech mecca, Silicon Valley.
Even though strong support for China?s entry into the WTO has been voiced by most ASEAN leaders, including Singapore?s, there is widespread trepidation about the longer term effects. Most are still licking their wounds from the debilitating effects of the Asian economic crisis, which struck three years ago and spread quickly throughout the region.
White House Economic Advisor Gene Sperling explains why failure to support Permanent Normal Trade Relations for China would be a serious setback for economic reform in both China and the U.S.
?Once China accedes to WTO and gets associated trade benefits from member countries it is possible that they would become more competitive, assuming their infrastructure could cope. The ASEAN?s are nervous about this,? said a U.S.-based trade consultant with close ties to ASEAN leaders. Still, others note that China is notoriously slow at instituting change, and is unlikely to shake up the region?s economics in a hurry.
In the run-up to China?s anticipated entry into the WTO, the 32-year-old ASEAN has fast-tracked efforts to eliminate trade barriers within the Southeast Asian region. Last year, the ASEAN leaders agreed to bring forward the deadline for zero tariffs in the ASEAN Free Trade Area from 2015 to 2010 for its six leading members. By the end of 2002, almost all tariffs will be reduced to zero and five percent. ASEAN ? which includes Singapore, Malaysia, Brunei, the Philippines, Thailand, Burma, Vietnam, Cambodia, Indonesia and Laos ? also decided to quickly establish a common free trade space for information technology and e-commerce.
The free trade area will encompass a market of 500 million people, half of China?s population, with gross domestic product of about $740 billion and total trade in the range of $720 billion a year. The total size of the area will increase even further with the proposed inclusion of Australia and New Zealand.
Said George Yeo, Singapore?s Industry and Trade Minister: ?One factor driving the consolidation of ASEAN is China? China?s entry will also have a diversionary effect on investments into ASEAN. We in ASEAN will have to think hard how to reposition ourselves for more intense competition. There is stronger political will now to integrate all of Southeast Asia economically into one economic area for trade and investment.?
The eradication of protected state industries and the improved foreign investment environment that could result from China?s WTO entry also pose competitive threats to the Southeast Asian region. Though Chinese leaders speak of increased imports from Southeast Asian countries ? in part to reduce an existing trade surplus ? some analysts believe the inflow will remain low value commodities and semi-finished goods.
American and British politicians struggle to stabilize trade after World War II. They agree on goals such as reducing international trade tariffs, outlawing discrimination and eliminating quotas on goods.
Dec. 1945
American and British governments introduce set of "proposals" that would establish the International Trade Organization (ITO). Fifteen other countries are invited to join the effort and the proposals gain momentum.
Feb. 1946
The proposals are accepted by the United Nations Economic and Social Council. An 18-government committee appointed to explore the idea of an ITO extends invitations to the rest of the seventy members of the UN Council.
Oct. 1947
The General Agreement on Tariffs and Trade (GATT) is signed by 23 countries, cutting tariffs as a prelude to an ITO. Meanwhile, participating countries are busy drawing up the ITO's "Havana Charter." But ITO plans are abandoned when the U.S. Senate refuses to ratify its charter. GATT remains in effect, but without an administrative organization.
1949
The second of eight successive GATT negotiations, called "rounds," begins in France. Some 350 national delegates continue these meetings every five to six years.
1973
With 120 participating countries, GATT's Tokyo Round breaks new ground with agreements on non-tariff barriers. But most of the agreements are left largely non-binding to many members.
Sept. 1986
A new negotiating round, called the Uruguay Round, begins. It is the most ambitious trade negotiation to date. The ministers are able to accept an expanded agenda which, for the first time, covers trade in services and intellectual property. (GATT had only covered trade in goods.) The ministers gave themselves four years to complete their work.
December 1990
At a new round in in Brussels, disagreement on agricultural trade reform leads to a decision to extend the Round. For two years, the negotiations lurch continuously from impending failure to predictions of imminent success. Differences between the United States and European Community become central to the hope for successful conclusion.
December 1993
All outstanding issues from the Brussels Round on market access are finally resolved and an agreement is prepared.
April 1994
The World Trade Organization is created when ministers from most of the 125 participating governments meet in Marrakesh, Morocco, to sign the agreement. The WTO is to become a formal international institution, joining the ranks of the World Bank and International Monetary Fund (IMF).
January 1995
The WTO debuts as the embodiment of the Uruguay Round of GATT negotiations.
December 1996
The first meeting of WTO ministers takes place. It provides the first in-depth review and assessment of WTO operations, establishes a precedent for future meetings and gives member countries an idea of how the organization will set policies.
?A ?new and improved? China will be even more competitive in remaining and processing these materials into higher valued finished goods to sell back in the rest of Asia. As such I do see the stunting of ASEAN to an extent, as an open and free China will make it even more difficult for them to develop their manufacturing base and develop further into higher value goods,? said Michael Craddock, a Taipei-based trade representative for the Greater China region for the Canadian province of British Columbia.
A change in regional security issues have also been raised with the prospect of China joining the WTO.
Some analysts argue that WTO membership could strengthen the hand of moderates in China and, in turn, increase regional security. The thinking is that the more influence moderates in China assume, the less likely the temptation of China to flex its muscles in Asia ? whether over sovereignty issues concerning Taiwan or ownership disputes in the South China Sea.
Said Bruce Gale, of the Singapore office of Political and Economic Risk Consultancy: ?If China gets into the WTO, that should strengthen the moderates in Beijing, making it less likely that an economically distressed China would turn on the heat down south in pursuit of some military adventure to draw attention away from its own economic shortcomings.
?Countries such as the Philippines, Vietnam and maybe even Malaysia, would thus breath easier, seeing China as a responsible player on the world scene. Even Singapore would see this as a positive because it implies that trade routes in East Asia remained safe for international shipping.?
Gale notes that the focus of most multinational corporation?s interests are in Northeast Asia, rather than in ASEAN. If moderates in China were to loose influence, it could result in a slowing of economic reform in the mainland, as well as less foreign commercial activity. ?If the situation inside China were to deteriorate, this could encourage more investment to flow into the ASEAN countries,? said Gale. |
